NOVEMBER 2019 - MTY Food Group · 2019. 10. 31. · competitive nature of the quick service...

N O V E M B E R 2 0 1 9

Forward-looking Statements

2

This presentation may contain written and oral statements that constitute forward-looking statements. These forward-lookingstatements may involve, but are not limited to, comments with respect to our business or financial objectives, our strategies orfuture actions, our targets, expectations for our financial condition or our outlook for our operations and future earn-out andadditional equity interest obligations.

Forward looking statements are not guarantees of future results, performance, achievements or developments and actual results,performance, achievements or developments may differ materially from those in the forward-looking statements as a result ofvarious factors, including downturns in general economic conditions, consolidation and globalisation of the industry, the highlycompetitive nature of the quick service restaurant industry, the greater resources available to much larger global players, lowentry barriers for new competitors, our ability to successfully integrate our acquired and to-be-acquired businesses and theretention of key management personnel. Assumptions relating to the foregoing involve judgments and risks, all of which aredifficult or impossible to predict accurately and many of which are beyond our control.

Although we believe that the expectations reflected in the forward-looking statements are reasonable based on informationcurrently available to us, we cannot assure that the expectations will prove to have been correct. Accordingly you should notplace undue reliance on forward-looking statements. In particular, forward-looking statements do not reflect the potential impactof any merger or acquisitions or other business combinations or divestitures that may be announced or completed after suchstatements are made. Reference should be made to the most recent annual Management’s Discussion and Analysis for an in-depth description of major risk factors.

Non-IFRS Measures

3

Unless otherwise indicated, the financial information presented below, including tabular amounts, is expressed in Canadiandollars and prepared in accordance with International Financial Reporting Standards (“IFRS”). MTY uses earnings before interest,taxes, depreciation and amortization (“EBITDA”), because this measure enables management to assess the Company’soperational performance. The Company also discloses same-store sales growth, which are defined as comparative salesgenerated by stores that have been open for at least thirteen months or that have been acquired more than thirteen monthsago, and system sales, which represents the total net sales of the franchised and corporate restaurants of its network.

These measures are widely accepted financial indicators but are not a measurement determined in accordance with GAAP andmay not be comparable to those presented by other companies. These non-GAAP measures are intended to provide additionalinformation about the performance of MTY, and should not be considered in isolation or as a substitute for measure ofperformance prepared in accordance with GAAP.

The Company uses these measures to evaluate the performance of the business as they reflect its ongoing operations.Management believe that certain investors and analysts use EBITDA to measure a company’s ability to meet payment obligationsor as a common measurement to value companies in the industry. Similarly, system sales and same-store sales growth providesadditional information to investors about the performance of the network that is not available under GAAP. These measures arecomponents in the determination of short-term incentive compensation for some employees.

This presentation should be read in conjunction with the Company’s financial statements and the notes thereto and theManagement Discussion and Analysis (MD&A).

Agenda

4

INVESTMENT THESIS

OVERVIEW OF MTY GROUP

MARKET OVERVIEW

FINANCIAL TRENDS

Q3-2019 RESULTS

APPENDIX- Historical Data- Papa Murphy’s Acquisition

STRATEGY AND FUTURE GROWTH

5

INVESTMENT THESIS

Investment Thesis

6

• Proven consolidator with disciplined acquisition strategy

• Track record of growth

• Strong cash flow generation ability

• Recurring revenue streams in the franchising segment

• Diversified portfolio of over 80 brands

• Knowledgeable and committed team

• Well positioned for more acquisitions

7

OVERVIEW OF MTY GROUP

MTY Group at a Glance

8

Franchises and operates quick-service and casual dining restaurants under ≈ 80 brands

Corporate Stores

14%

Food Processing & Retail

11%

60%Franchise Operation

(1) Percentages are calculated by excluding intercompany revenues

63%Street front

Food court

16%

Non-traditional

21%

45%U.S.

50%Canada

International

5%

MTY Group

$531MLTM Q3-2019 Revenues(1)

$3.3BLTM Q3-2019

Network Sales(2)

7,441Q3-2019 Locations

MTYTicker $1.3BMarket Cap. ≈80Brands

Underlying Network

As at October 31, 2019

(2) This is a non-IFRS measure. Please refer to page 3 of this presentation.

* 2018 figures have been restated to reflect the adoption of IFRS 15.

Promotional Funds

15%

Stanley Ma, founder, opens 1st restaurant

1st acquisition: • Fontaine Santé

Listed on Vancouver Stock Exchange

Acquires • Sushi Shop

AcquiresCountry Style Food Services Holdings Inc.

Acquires• Jus Jugo Juice • Mr. Sub • Extreme Brandz

Acquires• The Works Burger • Dagwoods• The Counter Custom Burgers • Built Custom Burgers

Milestones in ~40-Year History

9

1979 1980s

LaunchesSukiyaki

2006 2008

Exclusive franchise rightsfor Taco Time in Canada

20091990s 2001-05

Develops Villa Madina concept

Acquires • La Crémière• Cultures• Mrs. Vanelli’s

2010

Acquires Groupe Valentine

Acquires a food processing plant

2011-13 2014

Acquires• Café Dépôt • Sushi Man • Muffin Plus • Fabrika• Manchu Wok • Wasabi Grill & Noodle• SenseAsian• Cafés-Bistros Van Houtte

2015-17 2018

Acquires•Timothy’s World Coffee • MMMuffin• Grabbagreen• • Sweet Frog Premium Yogurt

Announces new CEO

Listed on TSX

Acquires Kahala Brands

Tiki Ming –first franchise

restaurant in 1983

Imvescor

2019

Acquires• Casa Grecque• South Street Burger• Yuzu Sushi• Allô! Mon Coco

AcquiresPapa Murphy’s

Track Record of Growth

10

145191

276

426

531

2015 2016 2017 2018 LTMQ3-19

Revenues (M$)

51 52

94 98105

2015 2016 2017 2018 LTMQ3-19

Operating Cash Flow (M$)

26

55 50

96

71

2015 2016 2017 2018 LTMQ3-19

Net Income (M$)

5166

94

125 137

2015 2016 2017 2018 LTMQ3-19

EBITDA(1) (M$)

35% 34% 34%29%

26%

48% 45% 45% 46% 44%

2015 2016 2017 2018 LTMQ3-19

EBITDA(1) Margin (%)

Consolidated EBITDA (%) Franchise EBITDA (%)

-0.5%-0.4%

-0.2% -0.2%

-0.0%2015 2016 2017 2018 YTD

Q3-19

Same Store Sales Growth(1)

(1) This is a non-IFRS measure. Please refer to page 3 of this presentation.* 2018 figures have been restated to reflect the adoption of IFRS 15.

International Network in 39 Countries

11

7,441 locations and $3.3B in Sales in LTM Q3-2019

Canada2,828 $1,610M

United States4,092 $1,516M

International521 $176M

Network Evolution

12

1,066

3,303

2015 2016 2017 2018 LTMQ3-19

Network Sales (M$)(1)

2015 2016 2017 2018 LTMQ3-19

Network Sales by Geography (%)(1)

Canada U.S. International

2015 2016 2017 2018 LTMQ3-19

Network Sales by Type (M$)(1)

Food Court Street front Non-traditonal

2,738

7,441

2015 2016 2017 2018 Q3-19

Number of Locations

2015 2016 2017 2018 Q3-19

Locations by Geography


2015 2016 2017 2018 Q3-19

Locations by Type


7,441

2,738 2,738

7,441

1,066

3,303

1,066

3,303


Growing by Acquisitions

13

MTY has realized over 50 acquisitions since 1999

2006-2010

1999-2005 2011-2015

Cold Stone Creamery, Blimpie, Taco Time, Surf City Squeeze, The Great Steak & Potato Company, NrGize Lifestyle Café, Samurai Sam’s Teriyaki Grill, Frullati Café & Bakery, Rollerz, Johnnie’s New York Pizzeria, Ranch One, America’s Taco Shop, Cereality, Tasti D-Lite, Planet Smoothie, Maui Wowi and Pinkberry

BF Acquisition Holdings, LLC• Baja Fresh Mexican Grill • La Salsa Fresh Mexican

Grill• La Diperie

2016• Steak Frites St-Paul • Giorgio Ristorante• The Works Gourmet

Burger Bistro• Houston Avenue Bar &

Grill • Industria Pizzeria & Bar• Dagwoods Sandwiches

and Salads• The Counter Custom

Burgers• Built Custom Burgers

2017

Baton Rouge, Pizza Delight, Scores, Toujours Mikes and Ben & Florentine• Grabbagreen• Timothy’s World Coffee • Mmmuffins

2018

• Jugo Juice• Mr. Submarine• Koryo Korean BBQ• Mr. Souvlaki• SushiGo• Extreme Pita• PurBlendz• Mucho Burrito• ThaiZone• Madisons• Café Dépôt• Muffin Plus• Sushi-Man• Fabrika• Van Houtte Café Bistros –

perpetual franchising license

• Manchu Wok• Wasabi Grill & Noodle• Sense Asian• Big Smoke Burger

• Fontaine Santé/Veggirama

• La Crémière• Croissant Plus• Cultures• Thai Express• Mrs. Vanelli’s• TCBY – Canadian master

franchise right

• Yogen Fruz – Canadian master franchise right

• Sushi Shop• Koya Japan• Sushi Shop – existing

franchise locations• Tutti Frutti• Taco Time – Canadian

master franchise rights• Country Style Food

Services Holdings Inc.

• Groupe Valentine inc.

Kahala Brands Ltd

ImvestorRestaurant Group

• Casa Grecque• South Street Burger• Yuzu Sushi• Allô! Mon Coco

2019

Papa Murphy’s

Diversified Portfolio of Over 80 Brands

14

Asian & Indian Frozen treats & smoothies American

Sandwiches & Salads Mediterranean Italian

Breakfast Mexican Coffee

Protects MTY from shifts in customer preferences

Strong Brands Make Up a Large Part of Portfolio

15

MTY ranks 21st among Canada’s Top 100 foodservice operators(1)

Frozen treats & smoothies represent32% of locations

Top 10 brands represent54% of Network Sales(2)

46%Other Brands

54%Top 10 Brands$3.3B

32%Frozen treats& smoothies

7,44110% Coffee

12% Asian & Indian

9%Sandwiches

& Salads

7% Mexican

2% Breakfast 1% Mediterranean5% American

Italian22%

(1) Source: Foodservice and Hospitality, The Annual Top 100 Report, May 2018(2) This is a non-IFRS measure. Please refer to page 3 of this presentation.

LTM Q3-2019 Q3-2019

0

20

40

60

80

Stock Price Appreciation Since Listed on TSX

16

Shares outstanding 25.2 M

Float 19.5 M

52 week average daily volume 70,556

52 week high-low $73.19-$52.01

Market capitalization $1.3B

Oct. 31:

$52.62

Management and the Board own 22% of shares

Source: Yahoo Finance. Transactions on the TSX only.

17

Knowledgeable and Committed Management Team

Eric LefebvreChief Executive Officer

Renée St-OngeChief Financial Officer

Jason BradingCOO Quick Service

Restaurants

Jeff SmithCOO US Market

Marc BenzacarCOO Fast Casual

Restaurants

Marie Line BeauchampsCOO Casual Dining

Restaurants

18

MARKET OVERVIEW

General Market Conditions

19

Current environment is highly competitive in terms of value

and innovation

Pressure caused by minimum wage increases on margins

and prices

Significant consolidation is taking place both in the U.S.

and in Canada

Delivery and meal kits are causing a shift in market

Loyalty programs integration to be part of the experience

Market Size by Foodservice Sales

20

C$84B

MTY has less than 1% market share in North America

Foodservice Sales in Canada

35%Full service

36%Limited service

7%Social & contract

caterers

3%Drinking places

Food & Drink Sales in the U.S.

US$784B

Sources: 2017 Canadian Institutional Foodservice Market Report, April 2017; Technomics foodservice state of the industry, January 2019

Market Size by Number of Restaurants

21

88,795

97,000 +

2014 2015 2016 2017 2018

630,964660,755

2014 2015 2016 2017 2018

Commercial Foodservice Units (Canada) Establishments in U.S. Fast Food Industry

Number of restaurants constantly growing

Sources: Restaurants Canada, Industry Key Facts; https://www.statista.com/statistics/244616/number-of-qsr-fsr-chain-independent-restaurants-in-the-us/

Market Size by Food Dollars Spent in Restaurants

22

47.0%

53.8%

2014 2015 2016 2017 2018

% Spent of food $ (U.S.)

Proportion of food dollars spent in restaurants on the rise in Canada but still way below that of the U.S.

38.2%

39.1%

2014 2015 2016 2017 2018F

% Spent of food $ (Canada)

Sources: Restaurants Canada, Foodservice Industry Forecast 2018-2022; Restaurants Canada, Foodservice Facts, Market Review and Forecast; United States Department of Agriculture: https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/food-prices-and-spending

23

Highly Competitive Industry with Low Barriers to Entry

MTY Competes with a variety of players in each of its local markets

Restaurants

Coffee Shops

Supermarkets

Street Vendors

Delicatessen

Take-out & delivery operations

Convenience food stores

Quality, variety and value perception of foodproducts offered

Quality of service

Number of banners

Restaurant location (proximity)

Quality and speed of service

Attractiveness of facilities

Convenience (on-line ordering, delivery, etc.)

Effectiveness of marketing

New product development

Competitive Factors

24

MTY Key Success Factors

MTY Effectively Responds to Consumer Needs

Preparation often in front of customersenhances perception of freshness and quality

Presence in shopping malls, on main arteries, office towers, etc.

80 banners, often with multiple banners in one given location to capture customers’ fooddollars

Decentralized approach to innovation provides a wide array of novelties

Affordable meals usually around $10

Bonapp for technology-driven consumers

New dedicated team to develop and promoteretail and production operations

MTY Competitive Advantages

25

STRATEGY & FUTURE GROWTH

Growth Strategy – Increasing Market Share

26

LEVERAGINGour solid platforms to expand

throughout North America

DEVELOPPINGour Canadian brands in the U.S.

FOCUSINGon high-quality of revenues that

are recurring in nature

SEEKINGinternational Master franchise opportunities

IMPROVINGMTY’s digital presence via new

applications, on-line functionalities and integration of our gift card

and loyalty platforms

UPGRADINGthe image of our concepts and innovating with new menu offerings

Growth Strategy – Acquisitions

27

REINFORCINGCanadian platform by regions

LEVERAGINGour U.S. platform to integrate acquisitions

PROVIDINGadditional depth and breadth in offering

PAYING FAIR PRICEfor good quality earning potential

ACCESSINGa wide range of target sizes and concept maturity

TRANSACTIONSImmediately accretive from an EBITDA(1) standpoint

Strong reputation for paying a ‘fair’ price

Experiencedintegration team

Vendor’s awarenessof MTY’s appetite

Increased capabilitiesgiven increased size of

the organization


28

F INANCIAL TRENDS

Diversifying Product Mix

29

2010 2011 2012 2013 2014 2015 2016 2017 2018 LTMQ3-2019

Franchise Corporate Stores Promotional Funds Food Processing & Retail

$531M

$67M

Consistent growth in revenue in our core franchising operations

Food processing & retail expected to

become more important but

remains non-core

Note: Total revenues include interco.* 2018 figures have been restated to reflect the adoption of IFRS 15.

2010 2011 2012 2013 2014 2015 2016 2017 2018 Q3-2019


Growing Street Front & Non-Traditional Locations

30

7,441

1,727

Food courts not prone to grow, reflecting shopping center limited growth

2010 2011 2012 2013 2014 2015 2016 2017 2018 Q3-2019


Continuing to Penetrate the U.S. Market

31

7,441

1,727

Over 50% of locations are in the U.S. following Papa Murphy’s acquisition

$26M

$137M

39%

33%36%

39%37%

35% 34% 34%29% 26%

44% 45%49% 51%

48% 48%45% 45% 46% 44%

-

20

40

60

80

100

120

140

160

2010 2011 2012 2013 2014 2015 2016 2017 2018 LTMQ3-2019

Consolidated EBITDA Consolidated EBITDA % Franchise EBITDA %

Growing EBITDA(1) Consistently

32(1) This is a non-IFRS financial measure. Please refer to page 3 of this presentation.* 2018 figures have been restated to reflect the adoption of IFRS 15.

EBITDA(1) is primarily driven by the franchising segment

(1) (1) (1)

2010 2011 2012 2013 2014 2015 2016 2017 2018 LTM Q3-2019

Q4-2019

Acquisitions Capex Dividends

Deploying Capital Mainly for Acquisitions

33

$398M

$9M

$144M

$40M$6M

$63M$32M $19M

$260M

$36M

Not a capital intensive business

Acquisition of Kahala(1)

(1) Net cash outflow only.

Several acquisitions,

including Imvescor(1)

Several acquisitions,

including Papa Murphy’s

RenewedNCIB

in June 2019 and started buying back

shares in Q4-2019

$0.04

$0.18$0.22

$0.28$0.34

$0.40$0.46 $0.46

$0.60$0.66

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E

Increasing Dividends Consistently

34

The number of shares

increased in 2017

Dividend typically represents 15-20% of FCF(1)

(1) FCF is EBITDA less taxes and interest. EBITDA is a non-IFRS financial measure. Please refer to page 3 of this presentation.

3.8x

0.1x 0.3x 0.2x0.5x 0.5x 0.3x

3.3x

1.8x

1.9x

-

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015 2016 2017 2018 Q3-2019

Total Debt Net Debt / LTM EBITDA

Optimizing Financing Structure

35

$526M

Maintaining a solid balance sheet

Acquisition of Kahala

(1) On a total debt basis.

(2) This is a non-IFRS financial measure. Please refer to page 3 of this presentation.* 2018 figures have been restated to reflect the adoption of IFRS 15.

(2)

(1) (1) (1) (1) (1) (1) (1)

36

Q3 2019 RESULTS

37

Seasonality of MTY Results

Q1Dec-Jan-Feb

Q2March-Apr-May

Q3June-July-Aug

Q4Sept-Oct-Nov

Winter Spring Summer Fall

Sales for Frozen treats & smoothies SOFT STRONG STRONGEST SOFT

Sales for Papa Murphy’s STRONG STRONG SOFT STRONGEST

Food court sales are higher during Decemberbecause of Holiday shopping

Higher street front sales

Higher sales from foodcourts

Network sales(1) fluctuate with the seasons


Halloween is the biggestsales day for Papa Murphy’s

$113.0M

$163.1M

Q3-18 Q3-19

Canada US & International

$113.0M

$163.1M

Q3-18 Q3-19

Promotional Fund Food processing & retail

Corporate Franchise

Q3-19 Increasing Revenues

38

Acquisitions contributed $17.8M to revenues

Revenues increased mainly driven by the Papa Murphy’s acquisition

Note: Revenues include interco.* Q3-2018 figures have been restated to reflect the adoption of IFRS 15.

$38.8M $41.8M

Q3-18 Q3-19

Franchise Corporate Food processing & retail

Q3-19 Increasing EBITDA(1)

39

NormalizedEBITDA for Q3-19 was

$42.1M34%

The third quarter is the softest quarter for Papa Murphy’s, representing ~13% of its total EBITDA generation for the year

26%

$38.8M $41.8M

Q3-18 Q3-19

Canada US & International

(1) This is a non-IFRS financial measure. Please refer to page 3 of this presentation.* Q3-2018 figures have been restated to reflect the adoption of IFRS 15

34%26%

$22.1M $22.9M

Q3-18 Q3-19

Q3-19 Net income and EPS

40

Net income & EPS are slightly higher than last year due to the increase in EBITDA

$0.88 $0.91

Q3-18 Q3-19

* Q3-2018 figures have been restated to reflect the adoption of IFRS 15.

Normalizedbasic EPS in Q3-19 was $0.92 per

share

$28.2M $27.2M

Q3-18 Q3-19

Q3-19 Cash Flow from Operations & Use of Cash

41

Higher interest payments due to the Papa Murphy’s acquisition and higher income tax payments slightly reduced cash flow from operations

$6.3M

$54.8M

Q3-18 Q3-19

Acquisitions Capex Dividends

Cash Flow from Operations Use of Cash

Increased our dividend by

10% in January 2019

* Q3-2018 figures have been restated to reflect the adoption of IFRS 15.

Papa Murphy’s

acquisition

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

Used Available

Q3-19 Healthy Financial Position

42

$500M $500M $500M

$650M $650M

Leverage increased due to Papa Murphy’s acquisitionAfter Q3-19 we raised the authorized limit on revolver to $700M

1.9x 1.9x 1.8x 2.0x3.8x

-

100

200

300

400

500

600

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

Net Debt Net Debt / LTM EBITDA


(1)

Q3-19 Network Locations and Network Sales(1)

43

Network locations and Network sales(1) increased driven by acquisitions

5,690

7,441

Q3-18 Q3-19

Food Court Street Front Non-traditional

5,690

7,441

Q3-18 Q3-19Ontario Québec & Eastern CanadaWestern Canada U.S.International

(1) This is a non-IFRS financial measure. Please refer to page 3 of this presentation.

Sales:$790M

Sales:$1,076M Sales:

$790M

Sales:$1,076M

Q3-19 Same Store Network Sales(1)

44

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

Consolidated

0.1%

(1.3%)

0.6%

(1.4%)

0.3%

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

Canada

1.4%1.2%

0.0% 0.0%

0.7%

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

U.S.0.6%

(0.3%)

(1.9%)(2.3%)

0.6%

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

International

(9.2%)

(5.5%)

(8.9%) (9.2%)

(5.4%)

(1) This is a non-IFRS financial measure. Please refer to page 3 of this presentation.

45

Q3-19 Network Location Evolution

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

Beginning of period 5,734 5,690 5,984 5,941 7,345

Opened 67 68 60 75 84

Closed (111) (105) (134) (115) (157)

Acquired - 331 31 1,444 169

End of period 5,690 5,984 5,941 7,345 7,441

Net (44) 294 (43) 1,404 96

Closures as a % of number of locations 1.9% 1.8% 2.2% 1.9% 2.1%

Location closures represent on average 2% of total locations

46

APPENDIX 1H i s t o r i c a l D a t a

Income Statement - 5-Year Financial Summary

47

(thousands of $, except margin and EPS) 2018 2017 2016 2015 2014

Sales 426,584 276,083 191,275 145,203 115,177

EBITDA(1) 124,851 93,726 65,841 50,682 42,659

EBITDA margin %(1) 29.3% 33.9% 34.4% 34.9% 37.0%

Net income 96,187 49,854 54,867 26,223 25,185

EPS - diluted 3.95 2.32 2.73 1.36 1.32


Financial Position - 5-Year Financial Summary

48

(thousands of $, except ratio) 2018 2017 2016 2015 2014

Total assets 1,230,307 855,013 852,650 225,387 199,448

Total debt(1) 243,312 171,354 216,417 14,256 22,418

Shareholders’ equity 629,391 333,624 310,184 166,654 144,590

Total debt to trailing 12-month EBITDA(1,2) 1.9x 1.8x 3.3x 0.3x 0.5x

(1) For 2016 to 2018, net debt and net debt to trailing 12-month EBITDA.(2) This is a non-IFRS financial measure. Please refer to page 3 of this presentation.* 2018 figures have been restated to reflect the adoption of IFRS 15.

Network - 5-Year Financial Summary

49

2018 2017 2016 2015 2014

Network sales(1) (millions of $) 2,783 2,302 1,480 1,066 888

Locations 5,984 5,469 5,681 2,738 2,727


50

APPENDIX 2P a p a M u r p h y ’s A c q u i s i t i o n

Papa Murphy’s - An Exciting New Growth Platform

51

TRANSACTION SUMMARY

• MTY Food Group Inc. (“MTY”) and Papa Murphy’s Holdings, Inc. (“Papa Murphy’s”) announced on April 11, 2019 that they have entered into a definitive merger agreement

• MTY to acquire all of the issued and outstanding shares of Papa Murphy’s for US$6.45 per share, representing total transaction value of ~US$190.0 million (C$253.2 million), including Papa Murphy’s net debt outstanding

• Implied premium of 31.9% to the Papa Murphy’s closing price on April 10, 2019

• Consideration 100% funded in cash from MTY cash on hand and existing credit facility

• Transaction unanimously approved by the boards of directors of both companies

• Certain Papa Murphy’s shareholders, including each director and executive and officer, holding ~52.1% of Papa Murphy’s shares, have agreed to tender their shares into the offer

• Transaction closed on May 23, 2019

PAPA MURPHY’S OVERVIEW

• Franchisor and operator of the largest Take ‘n’ Bake pizza brand and the 5th largest U.S. pizza chain

• 1,331 franchised and 106 corporate-owned stores in 37 U.S. states, Canada and UAE(1)

• LTM System-wide Sales of US$809 million(2)

• LTM adjusted EBITDA of US$22.3 million(2)

• Support center will continue to be located in Vancouver, WA

All figures in CAD unless otherwise specified. Papa Murphy’s figures converted at a USDCAD FX rate of 1.3326(1) As of December 31, 2018 (2) LTM represents the twelve-month period ending December 31, 2018

Papa Murphy’s leading Take ‘n’ Bake pizza franchising concept offers a compelling strategic fit with MTY

Rationale for the Transaction

52

• Strengthens MTY’s leading portfolio of brands through the acquisition of the 5th

largest pizza chain in the U.S.

• Leading Take ‘n’ Bake pizza concept serving award-winning, superior quality products made with fresh ingredients

• Complements MTY’s U.S. operations and reduces seasonality of its results

• Building momentum after implementation of refreshed corporate strategy and refocus on the brand

• Seasoned management team to continue to operate the brand independently

• Expected to be immediately accretive to MTY’s EBITDA and cash flow per share

MTY’s pro forma network to have ~7,378 locations and $4B system sales globally with future runway for growth

Fresh, Hand-Crafted, Ready-to-Bake Pizzas

53

• Leading Take ‘n’ Bake pizza concept serving award-winning, superior quality products made with fresh ingredients

• #5 largest pizza chain in the U.S.

• Awarded best pizza chain for several years by multiple industry sources(1)

• Offers a differentiated, customizable experience capitalizing on “dine-in” trends

• Positive momentum from new digital ordering platform launched and other recent initiatives

Differentiated Market PositionPioneer Concept and Leader in a Growing Pizza Category

(1) Papa Murphy’s has received over 60 awards from major industry sources since 2001 including from Zagat, Market Force Information, Technomic Inc. and Consumer Reports

Unique concept driven by same core values as MTY: great quality of food, great service and great value

Overview of the U.S. Pizza Market

54

Pizza market is attractive due to its size, growth and fragmented competitive landscape

• Favorable consumer trends:

• Dining in more

• Increasingly cooking meals at home

• Heavily focused on quality and fresh ingredients

• U.S. pizza market estimated at US$42B and growing:

• 3.7% sales growth

• 1.3% unit growth

• Highly fragmented competitive landscape

• Top 5 pizza chains account for <50% of market

Pizza is the 2nd largest category in US$280B+ U.S. Limited Service Restaurant Sales

Source: Papa Murphy’s, Inc. Company filings and information, 2018 Technomic, and Top 500 Chain Restaurant Report

30%

15%

11%11%

10%

8%

15%

Other

Bolstering MTY’s U.S. Platform

55

CanadaUnited States International

Papa Murphy’s footprint complementary to MTY’s U.S. operations and reduces impact of seasonality

• + 1,400 new U.S. locations to MTY’s 2,733 existing U.S. network

• + $1.1B of incremental SWS to MTY’s existing $1.2B U.S. LTM SWS

Locations

All figures in CAD unless otherwise specified. Papa Murphy’s figures converted at a USDCAD FX rate of 1.3326.

LTM U.S. System Sales

46%

45%

9%

56%

36%

8%

Legend:

$1.2B $2.3B

Pro Forma

5,941 7,378

Transaction Contribution to MTY’s U.S. Network

Solid Combined Financials

56All figures in CAD unless otherwise specified. Papa Murphy’s figures converted at a USDCAD FX rate of 1.3326.

As of Feb. 28, 2019 As of Dec. 31, 2018 Pro Forma

LTM System Sales $2.9B $1.1B $4.0B

# of Locations 5,941 1,437 7,378

% of Network Franchised 99% 93% 97%

LTM Revenue $445M $169M $614M

LTM EBITDA $134M $30M $164M

Net Debt / LTM EBITDA 1.9x 3.4x 3.1x

• Following completion of the transaction, MTY is expected to continue to generate significant cash flow, allowing for deleveraging and providing liquidity to pursue future M&A opportunities

• MTY also anticipates working with Papa Murphy’s to make capital investments focused on growing top line sales and increasing franchise partner profitability

Expected to be immediately accretive to MTY’s EBITDA and cash flow per share

NOVEMBER 2019 - MTY Food Group · 2019. 10. 31. · competitive nature of the quick service...

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